Looks like you've done some careful thinking about this, it looks good! Careful attention is the secret of a well planned game.
My first impressions, take them as you will:

Mechanics
*The way you have everything set up here will require some major tweaking to the system you plan to use--if you're staying with either 4e or 3.5;
*For example, having several people in a group of differing levels will get difficult to manage. Nobody will be able to fight efficiently in the same encounter; the level 11 guy will kill everything in one hit, the level 3 guy won't be able to hit anything because his attack bonus won't be anywhere near the monster's AC, etc. You'll need to either re-write all the monster's mechanics, come up with a new combat system, or choose a different system entirely.
*Three magic items of the player's level plus three of up to three levels higher is rather unbalanced--the standard for starting characters is one magic item at level, one level +1, and one level -1, plus gold equal to one item of level -1. So a level four player will get magic items of level 3, 4, and 5, and 680 gold.
*No bookkeeping for ammunition/consumables is awesome. You'll want to watch consumables like health potions, though.

Posting
*Looks good! As I mentioned before, I think it's important to lay this out right from the start, so glad to see you're putting thought into it.
*The one question I had was about having no internal thoughts; do you mean internal dialogue? For example: I hope we find an inn soon, Rolan thought. This rain is interminable. Having such thoughts can be great for role play, because it allows players to vocalize things without having their characters do so. It adds flavour.
Or do you mean the player's thoughts? For example: "Hey guys, Rolan doesn't like the rain, so I'm just going to have him sulk for a bit until we find an inn." You're right in not including that, though such thoughts can always be put into [ooc][/ooc] or [spoiler][/spoiler] tags.

Combat/dice
*I have to admit, I'm completely lost here. So a player doesn't roll initiative--but if his attack roll hits and the monster's doesn't, the player goes first? Does that happen every round?
*You have only d10s and d6s? What about attack damage? You'll need to house rule all the different weapons if you go this way, or figure out how to make one weapon better than another; having a great axe work mechanically the same as a dagger will break the game, as nobody will need to spend proficiency feats or increase their primary stats to get a good attack bonus.
*I like the idea of having a "special moment" when you roll a crit, though. Will this replace a critical hit, or add to it? From a cinematic perspective, it's a great idea!
*Being able to roll a skill to empower your attack in the same roll is a nice idea--I can see lots of creative potential there. how will rolling a skill affect the attack though? For example, say I roll Arcana to call upon the demons of the shadowfell to empower my Warlock's Curse. How does succeeding or failing that roll affect the attack? What if I don't roll it in the first place, is my attack any less powerful?
*If you're going to eliminate social rolls, you'll want to have some specific "rules" regarding social interaction. That is, how can one succeed in a social encounter, and how does one fail? If you don't lay this out, there could be a lot of argument--who's to say my prose wasn't skillful enough, and by what standards is it judged?

All in all, I can see you've put a great deal of thought into it, which is good--I commend you for the attention you've put to this. But, i think before going further you'll want to take a step back and look at the picture as a whole.
You're changing some of the most vital parts of the game system--if you're using 3.5 or 4e or any other d20 system, that is. You're changing, by my count:

*How skills are used/rolled, including eliminating some
*How leveling and advancement works
*How Hit Points--and by extension, healing--works. (i.e. if you've got hit points by level, Healing Surges are basically useless or arbitrary.)
*Bookeeping
*Stats for attacks, weapon damage, skill bonuses, etc as they pertain to dice used--i.e. everything is d10 or d6
*How initiative works

Now having some of these changes isn't too bad--lots of games here eliminate the need to track ammunition and certain consumables, for example, and leveling "by block" rather than by XP points gained per monster killed makes things a lot simpler. But changing all of this will--no offense--break the game. It's no longer a d20 system.

However--you may want to look into something like Fate. It's a narrative based system with simple rules, and is highly customizable. There's no reason you can't take the Sword and Sorcery themes and feel of D&D and play it using this system--and it will negate the need to make this many changes. Looking at what you want to do here, I think this is the way to go, if you're willing to learn a new system.
The drawback is that you may not get as much interest, as Fate games here aren't as popular as D&D. But if you 'sell' it as D&D Rules Lite or something like that, you might get around that.

Very helpful, tobias. Will try to address these, or if not, remove the relevant house rules:

Mechanics
*For example, having several people in a group of differing levels will get difficult to manage. Nobody will be able to fight efficiently in the same encounter; the level 11 guy will kill everything in one hit, the level 3 guy won't be able to hit anything because his attack bonus won't be anywhere near the monster's AC, etc. You'll need to either re-write all the monster's mechanics, come up with a new combat system, or choose a different system entirely.

The quantitative concerns are valid. What I am choosing instead, is to modify the qualitative instead; the behavior of the opponents, whereby the team matchup is a fair engagement against enemies. Teamwork, observing behavior to outsmart, use of terrain, are also qualitative advantages I will reward against seemingly stronger opponents.

Example: A team is facing a minotaur guarding a door. The creature has a large weapon with reach, so they cannot approach head on. One veteran moves left and towards the door, the minotaur turns to take him on. While it is trying to hit the agile runner, the veteran tumbles behind a rock near the door, the weapon clanging off it. In that moment, the leader rushes the minotaur, and wins a fortitude save to clash his weapon and lock the minotaur's weapon. The rookie had climbed to the top of a low wall, and jumps towards the minotaur's back, and, with a 'moment' awarded to him, stabs his dagger into the eye of the creature, driving it up the brainstem. The minotaur dies.

*Three magic items of the player's level plus three of up to three levels higher is rather unbalanced--the standard for starting characters is one magic item at level, one level +1, and one level -1, plus gold equal to one item of level -1. So a level four player will get magic items of level 3, 4, and 5, and 680 gold.

What I was aiming for was that the players need not feel weak or under-equipped. I rather they are strong characters, and take on stronger opponents, rather than weak ones against strong opponents. The raising of the base bar will affect the players starting experience of the campaign. Their items will not be unbalanced, cos the DM is the one deciding how powerful the opponents are. And, knowing the items and what they can do, will give the DM 'ammunition' to build creatively challenging enemies for the team, as per justified by the stakes of their objectives according to the Beats in their Thematic Arc.

Posting
*The one question I had was about having no internal thoughts; do you mean internal dialogue? For example: I hope we find an inn soon, Rolan thought. This rain is interminable. Having such thoughts can be great for role play, because it allows players to vocalize things without having their characters do so. It adds flavour.

Yes, I do mean internal dialogue. This is to reduce the chance of subconscious meta-responding to your fellow players posts. Also, it is expository writing which I do not support. The craft challenge here is to show through action, body language, dialogue and decisions, what is going on through your character's mind. This gives depth, and also, a reason for characters to interact with each other more than just talking to 'fight or fulfill' quests.

Example (using your Rolan's thoughts):

Player 1: Rolan looks up, the raindrops splashing on his face. He looks to the buildings around him, and his face falls.

Player 2 (noticing the post, and following up on a growing bond between them): Jenine puts her vampiric hand on his shoulder, 'Are you alright, Rolan?'

Player 1 (a background of religious upbringing that demonizes vampires): Rolan stiffens, just for that one moment, at the touch, but he relaxes with effort and nods. 'Yes, it's just...the rain. It reminds me of home. Or when I lost my home. I'm sorry, just rambling. We need an inn.' He walks off.

Player 3 (good friend of Rolan, knows his pain, and also interested in Jenine): Broch goes to Jenine. 'Don't worry about him. He does this all the time. Like an inn is the only home he has now.' He smiles. 'Let's go, beautiful.'

-end-

Instead of internal dialogue, intent and conflict are brought to the fore, visible and expressive, giving other players space to RP into each other's character spheres, and cementing the connections between characters, which I feel has been underused by many teams. Like actors in theatre, each character is not paying attention to himself, but more of others around him, and taking or giving what he wants with them.

Combat/dice
*I have to admit, I'm completely lost here. So a player doesn't roll initiative--but if his attack roll hits and the monster's doesn't, the player goes first? Does that happen every round?

Yes, each fight will be more intense, intimate and interactive. His attack roll must be equal or higher than the enemy's, to be able to hit first. I am removing initiative value completely.

*You have only d10s and d6s? What about attack damage? You'll need to house rule all the different weapons if you go this way, or figure out how to make one weapon better than another; having a great axe work mechanically the same as a dagger will break the game, as nobody will need to spend proficiency feats or increase their primary stats to get a good attack bonus.

Attack damage, being combat, also uses d10. The different weapons will be houseruled where each weapon, or type, will have qualitative effects rather than 'just more damage'. This is also to reduce player preference for poring through loads of weapons for the small inch of extra damage, when this game does not require that nitpicking. The weapons will be laid out with special abilities tied to the way they are designed, and more variants can be requested by players during 'moments'. The idea is also that the players have more intimate connection with their chosen weapons, and stick with them longer through the game, and encouraged to give flavor to them. Less weapon changes, more 'flesh' to the weapons used.

Example: An axe and a dagger are both d10. An axe has the ability to hack off a limb, of which if it is a weapon limb, renders opponent unarmed. A dagger has the ability to stab into eye sockets or, using 'moments', dive deeper into the brain for instant kill.

*I like the idea of having a "special moment" when you roll a crit, though. Will this replace a critical hit, or add to it? From a cinematic perspective, it's a great idea!

Replaces crit. I am discarding crit; 'moments' give players more leeway for actions that does not need quantitative damage.

Skills
*Being able to roll a skill to empower your attack in the same roll is a nice idea--I can see lots of creative potential there. how will rolling a skill affect the attack though? For example, say I roll Arcana to call upon the demons of the shadowfell to empower my Warlock's Curse. How does succeeding or failing that roll affect the attack? What if I don't roll it in the first place, is my attack any less powerful?

DC is determined by me, based on the request of the player's attempt for whatever effect he desires. Your attack is as default, and empowering increases it. Not rolling it does not make it less powerful. I am more likely to allow 'empowering' that gives qualitative advantage than quantitative.

Example: Rather than player requesting arcana roll to add damage from shadowfell demons to the Curse, player can request to roll arcana to:
1. have a demon manifest through the curse, and the opponent may flee with terror, or his friends may do so as well
2. have an affect from the damage, such as, if the attack has fire, the fire may remain and start to burn up his shirt, or melt his sword
3. jam a spellcaster if the attack the enemy mage and a demon is stopping the mage from casting, or if demonic energies are coursing through the mage, rendering him unable to draw arcane energy

Special note: with your permission, tobias, I will like to use the term 'empower' to describe using skill rolls to enhance. I like the term and it covers the spirit and principle of what I envision the rolls to be.

Social
*If you're going to eliminate social rolls, you'll want to have some specific "rules" regarding social interaction. That is, how can one succeed in a social encounter, and how does one fail? If you don't lay this out, there could be a lot of argument--who's to say my prose wasn't skillful enough, and by what standards is it judged?

I will not make it extremely difficult to 'win' social encounters. Rather, unlike combat, social encounters require a different approach. To know the motivations, conflicts, weakness, and so on, about the characters, either through information before meeting, or during the conversation, and making use of that in whatever way fitting the character you created. The aim is not a contest of prose wills with the DM, but rather, to really know the people you are talking to, and connect with them, for an outcome.

Example: In Beat 3 of a Criminal Arc, the team has run away from a combat in Beat 2 that they did not win (and did not need to die). They retreated, and heard that their employer demands their heads for failure. One of the players suggest to seek refuge in the rival of their previous employer, and are now at the door. The guards don't take well to them, knowing they worked for their boss's rival, and draw their weapons. A player steps forward to negotiate a session with the boss, with bribes, and the guard accepts. All these, done through social (and probably and hopefully frantic quick thinking by players) posts.

Overview
All in all, I can see you've put a great deal of thought into it, which is good--I commend you for the attention you've put to this. But, i think before going further you'll want to take a step back and look at the picture as a whole.

The system is not unsalvageable. Some if it still works for me, while others I am changing. I am using a base that is familiar, but, with an offering of some tweaking, for curious players to try. This IS a work in progress after all, so even with feedback at this stage, I am humbly asking for patient and adventurous players to try prototyping with me on this, even as I try to give as much a finished product by the time I set up an ad. So it is not for players who prefer established full non-buggy systems at the ready.

If it is 4th edition, I may aim to use Surges to allow players to reactivate a power they used, or to help stave off conditions.

Now having some of these changes isn't too bad--lots of games here eliminate the need to track ammunition and certain consumables, for example, and leveling "by block" rather than by XP points gained per monster killed makes things a lot simpler. But changing all of this will--no offense--break the game. It's no longer a d20 system.

No, by a purist and technical look, it is not a d20 system. It is a dice system that I want to work on, using some useful components from the system, and evolve from there.

However--you may want to look into something like Fate. It's a narrative based system with simple rules, and is highly customizable. There's no reason you can't take the Sword and Sorcery themes and feel of D&D and play it using this system--and it will negate the need to make this many changes. Looking at what you want to do here, I think this is the way to go, if you're willing to learn a new system.
The drawback is that you may not get as much interest, as Fate games here aren't as popular as D&D. But if you 'sell' it as D&D Rules Lite or something like that, you might get around that.

Will look into it. May have some questions in case I don't understand that system, tobias. Hope you won't mind.

Mechanics
I think I see what you're going for with levels: you want each character to bring something different to the fight, including different...let's call it proficiency. The Veteran will be better at some things, while the rookie might have an edge in something else. Building a balanced party in such a way is a god idea, as it'll keep players more interested if they each have their niche.
Is there a specific reason you want different levels, though? I still think it could be challenging. In the above example, the veteran might be the only one able to hit the minotaur's AC, so the less experienced players try other things--but the DCs for the monster will still be at the Veteran's level, and will be difficult for the rookie to match. Or, if you change some of the DCs so the rookie can hit them, why wouldn't the Veteran aim for those and have an easy kill?
As for weapons, if you want a more powerful campaign, this will work fine I think.

Combat and Dice
I see where you're going with this too, I think. You want to avoid over-complicated character builds so you can concentrate on the stories of the characters rather than the mechanics--which is the whole purpose of this exercise to begin with. That's good, as long as you're up to changing the stats for character's chosen weapons, and it seems you are. I also like the idea of giving different weapons "properties" instead of differing damage die. That will definitely give players a chance to diversify their characters, and give them a reason to go for one weapon or another while still providing flavour for their build. You might want to write up a collection of weapons for players to choose from, however, so you're not re-skinning weapons on the fly as people apply.
Also, how will magic work? I can see wonderful creative potential for magic, but that extra creativity also makes it challenging to simplify the rolls for it.

Skills
I'm liking this idea, and no problem with you using the word Empower! I think this part is something that will have to actually be playtested to work out the kinks. There are a lot of variables, and it will be hard to proscribe enough limits to make it work smoothly without first seeing how far players want to push those limits...if that makes any sense.
What you suggest for social rolls reminds me of the skill challenges in 4e, where you can roll any skill you want for the situation at hand, as long as you can give a good enough reason for doing so. I could see this working fine as long as it's laid out for players what they can and can't do. But there may be questions like "I tried something really good, why didn't it work?" Having a roll gives a clear cut success or failure...but so would having specific requirements for each encounter.

Having surges replace or grant another use of a power is a nice idea too. The surge mechanic is supposed to be an expression of the character "putting forth great effort" in a way, so that idea fits the intended purpose nicely.

As for the system, I think you're right--this will require some actual playtesting to figure out the bugs and move from there. I think when this thread started people thought it would be D&D with more emphasis on role play and narrative; now it's starting to be more of a unique homebrewed system with fantasy elements. Which is great, as long as you're clear about that in the ad. There's a section for "Freeform" games, and the ad probably fits best in there. I'm sure there are lots of people here who are interested in helping build a new system, so I'm sure you can find interest. There's an enormous amount of creativity on the 'Weave...this is the place for such a project!

Mechanics
I think I see what you're going for with levels: you want each character to bring something different to the fight, including different...let's call it proficiency. The Veteran will be better at some things, while the rookie might have an edge in something else. Building a balanced party in such a way is a god idea, as it'll keep players more interested if they each have their niche.
Is there a specific reason you want different levels, though? I still think it could be challenging. In the above example, the veteran might be the only one able to hit the minotaur's AC, so the less experienced players try other things--but the DCs for the monster will still be at the Veteran's level, and will be difficult for the rookie to match. Or, if you change some of the DCs so the rookie can hit them, why wouldn't the Veteran aim for those and have an easy kill?

A little off the path I was describing. The rookie is by essence, weaker than the veteran, so it is not that he has an edge or a proficiency.

The example given was to showcase and respond to the question of how a team of varying levels can play together against enemies. The reason why it worked was because for the weapons clash to be effective, the leader was the strongest one that can match the minotaur; that leaves the veteran the next fastest guy to distract the minotaur and not get hit by its weapon. The rookie's action can be done by any other person, so long as they have a dagger with that property, for instance.

So it is not really that the rookies have something better. Why I want that varying levels is because, like not allowing internal thoughts prose to remove expository writing, I am deliberately creating a dynamic that I want players to deal with.

A team can be a team of equals with varying skills, that is how the RPG is done. But here, I am aiming for a team where there is a leader, and younger less experienced ones mentoring under him. This adds another tier of role play to the team.

Player behavior in general has shown these tiers of increasing play depth, adding on to the previous lesser tiers:

Tier 1 - you only worry about your own character doing its thing
Tier 2 - you keep track of other characters, especially during combat, to team up
Tier 3 - you actually give character development to your avatar, having it go through conflicts and grow
Tier 4 - you actually actively try to interact with other characters other than the need to just fulfil quests
Tier 5 - you and other players create internal conflict that has meaning other than 'druid vs paladin' gag reflex fights
Tier 6 - a well knit team of equals adventuring together, grow together, etc etc
Tier 7 - a well knit team of varying experiences adventuring together, grow together, etc etc

In the 7th tier, each player must not just respond to the character backgrounds, goals, differences and culture, but also the level of power, respect and implicit seniority among each other, thereby hopefully developing a mentor-pupil, father-son, big brother-little brother, captain-private, leader-supporter dynamics, which I find more challenging to role play.

In essence, there is no gameplay advantage to have a team of different levels; I am doing this cos I want to see that more challenging dynamics going through role play.

Combat and Dice
Also, how will magic work? I can see wonderful creative potential for magic, but that extra creativity also makes it challenging to simplify the rolls for it.

That is good question, and I had 2 options. Either I build a whole foundation for all the many many spells. Or, I let the players pick their spells, and then look closely into them, and weaving challenges that give the spell choices more impact.

There's a section for "Freeform" games, and the ad probably fits best in there. I'm sure there are lots of people here who are interested in helping build a new system, so I'm sure you can find interest. There's an enormous amount of creativity on the 'Weave...this is the place for such a project!

Don't see the Freeform game category in the ads forum though. I suppose I will put it either in 3.5 or 4th edition. Would you like to be one of the players? I can keep a slot for you.

I admit I haven't read the whole discussion so far, so I may be speaking bullshit here...

If your game is significantly different (system-wise) than 3.5 or 4e, put it in the Misc section instead. A bit of homebrew and the like is okay, but if you're diverging from the system on fundamental levels, you can't keep calling it the same anymore.

Also, on the Game Ads there are only sections for games currently advertising. There are no freeform games right now, so there isn't a section there at the moment... that doesn't mean the section doesn't exist.

Ah, so by playing with different levels you intend to create a certain dynamic that has some good role play potential. I can see that. To that end, though, could you just give each person a role, instead of making them a different level? Perhaps there's still a veteran and a rookie--and they need to role play that--but mechanically they're the same level. You'd need to explain why the veteran is the same level as the rookie maybe, but it would take away the need to re-work your monsters to fit different levels.
I'm actually playing in a game currently where one character is a grizzled old man who has loads of experience and intends to lead a bunch of younger characters into battle. We're all the same level, but the dynamic you describe is still there.

At any rate, I definitely like the idea of encouraging the "role" part of role play. It's so easy to get bogged down in the mechanics of a game and miss out on the fun part--telling a story.

For magic, I'd suggest letting the players select their spells, then forming them to fit your mechanics. Otherwise, you're reskinning a ton of different spells that people might not even use.
Or, you could maybe divide spells into the basic groups they had in 3.5; conjuration, evocation, necromancy, etc. Each of those schools of magic (I believe there are 7, but I'm not too familiar with it so I may be wrong) has a different method of working, according to your mechanics. Then the players are free to make up or select any spells that work within those certain schools, and they work as you intend them to.
For example, a character might have access to the Evocation and Necromancy schools when they begin, and can select two spells from each. Each school has a different way of working and offers different results or benefits, but a player can only make up spells from those schools. When they level, they get access to another school...that sort of thing.

As for the game ad, Silverkiss says it all. When you create a new game, the Game System pull down menu will give you the option of Freeform. If you put it into 3.5 or 4e, you might get a lot of players who expect something other than what you're proposing. There's the chance a mod will ask you to move it as well, if they don't think it fits.

As for playing, I'd be interested to help as best I can. I think it's a great idea!

I'm actually playing in a game currently where one character is a grizzled old man who has loads of experience and intends to lead a bunch of younger characters into battle. We're all the same level, but the dynamic you describe is still there.

Alright, I can work that way too. Amending the character creation component.

For magic, I'd suggest letting the players select their spells, then forming them to fit your mechanics. Otherwise, you're reskinning a ton of different spells that people might not even use.

That is my current preference too.

As for the game ad, Silverkiss says it all. When you create a new game, the Game System pull down menu will give you the option of Freeform. If you put it into 3.5 or 4e, you might get a lot of players who expect something other than what you're proposing. There's the chance a mod will ask you to move it as well, if they don't think it fits.

Silverkiss, tobias, understood.

As for playing, I'd be interested to help as best I can. I think it's a great idea!

Silverkiss, there is a slot for you too if you like, but I know you much prefer other systems. I understand

What about character creation? How will this be handled?
I'm guessing that archetypes from D&D would be welcome if you're going with a fantasy feel, but the mechanics of creating a character won't be the same.

What I mean is how will you determine stats? Is this a point buy, or rolled, etc. The roles you've laid out might work best as your "class," in a way, with the player able to further flavour it. So a player might choose to be a rookie who has dabbled in magic (wizard) or a veteran who's trained all his life with a halberd (polearm fighter).